DJ PhosAgro 2Q and 1H 2020 Financial Results: 2Q 2020 EBITDA Exceeds RUB 20 Billion, EBITDA Margin at 34%
OJSC PhosAgro (PHOR)
PhosAgro 2Q and 1H 2020 Financial Results: 2Q 2020 EBITDA Exceeds RUB 20
Billion, EBITDA Margin at 34%
28-Aug-2020 / 12:00 MSK
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
For Immediate Release 28 August 2020
PhosAgro 2Q and 1H 2020 Financial Results:
2Q 2020 EBITDA Exceeds RUB 20 Billion, EBITDA Margin at 34%
Moscow - PhosAgro ("PhosAgro" or "the Company") (Moscow Exchange, LSE:
PHOR), one of the world's leading vertically integrated phosphate-based
fertilizer producers, today announced its consolidated IFRS financial
results for the second quarter (2Q) and first half (1H) of 2020.
2Q and 1H 2020 highlights
Revenue for 2Q 2020 increased 3.1% year-on-year to RUB 59.9 billion (USD 828
million) due to an increase in export sales while maintaining a high share
of sales to the Russian market. Revenue for 1H 2020 decreased by 4.9%
year-on-year and totalled RUB 124.0 billion (USD 1.8 billion). The decrease
in revenue was due to a downward correction in fertilizer prices over the
course of the previous year.
In 2Q 2020, EBITDA increased 11.0% year-on-year to RUB 20.3 billion (USD 281
million), with the EBITDA margin increasing to almost 34% (from 31.5% in 2Q
2019). 1H 2020 EBITDA decreased 9.9% year-on-year to RUB 38.8 billion (USD
560 million), with an EBITDA margin of 31%.
Free cash flow in 2Q 2020 totalled RUB 2.0 billion (USD 28 million),
compared with RUB 10.2 billion (USD 158 million) in 2Q 2019. This decrease
was due to an accumulation of working capital related to the active recovery
in seasonal demand in export markets and an increase in exports. In 1H 2020,
free cash flow was RUB 20.3 billion (USD 303 million).
In 2Q 2020, net profit adjusted for non-cash FX items amounted to RUB 6.9
billion (USD 95 million).
As of the 30 June 2020, the net debt/EBITDA ratio was 1.95x, increasing
since 31 December 2019 due to the lower value of the rouble against the US
dollar in June, since most of the Company's debt portfolio is denominated in
US dollars. As of 30 June 2020, net debt totalled RUB 138.8 billion (USD 2.0
billion).
Financial and operational highlights
Financial highlights
RUB million or 2Q 2Q Chng, 1H 1H Chng,
% % %
2020 2019 2020 2019
Revenue 59,938 58,146 3.1% 123,9 130,4 -4.9%
96 33
EBITDA* 20,341 18,317 11.0% 38,84 43,09 -9.9%
3 5
EBITDA margin 33.9% 31.5% 2.4pp 31.3% 33.0% -1.7pp
Net profit 20,879 11,785 77.2% 5,291 32,94 -83.9%
5
Adj net 6,861 9,197 -25.3% 21,21 22,73 -6.7%
income** 6 7
Free cash flow 2,021 10,184 -80.2% 20,27 28,95 -30.0%
4 9
30.06.2020 31.12.2019
Net debt 138,787 131,583
ND/LTM EBITDA 1.95x 1.74x
Sales, ths 2Q 2Q Chng, 1H 1H Chng,
tonnes % %
2020 2019 2020 2019
Phosphate-based 1,789 1,629 9.9% 3,877 3,558 9.0%
fertilizers
Nitrogen 604 531 13.7% 1,306 1,148 13.8%
fertilizers
Total sales 2,393 2,160 10.8% 5,183 4,706 10.1%
RUB/USD rates: average 2Q 2020 rate: 72.4; average 2Q 2019 rate: 64.6; as of
30 June 2020: 70.0; as of 31 December 2019: 61.9
* EBITDA is calculated as operating profit adjusted for depreciation and
amortisation.
** Net profit as reported minus FX gain or loss.
Commenting on the Company's financial results, PhosAgro CEO Andrey Guryev
said:
"PhosAgro delivered strong financial results in the second quarter. Revenue
and EBITDA increased year-on-year, while the EBITDA margin reached 34%.
"This growth was mainly driven by higher sales volumes amid a recovery in
fertilizer prices and continued low prices for key inputs. Our flexible
sales model enabled us to redirect sales to export markets once the high
season in the Northern Hemisphere ended, focusing on the development of
seasonal demand in Latin America and India.
"Increased profitability was also facilitated by lower production costs due
to the transfer of portion of scheduled maintenance to the second half of
the year. This was done as part of a set of measures to reduce the risk of
the spread of the novel coronavirus at PhosAgro enterprises and in the
cities where the Company operates, as it made it possible to reduce the
number of external contractors involved.
"Stable debt levels combined with solid profitability enabled us to continue
implementing our investment programme to support PhosAgro's long-term
development. Capital expenditure for the quarter amounted to 48% of EBITDA.
"In the context of these strong financial results, PhosAgro's Board of
Directors has recommended that shareholders approve a dividend payout, in
line with the Company's dividend policy, in the amount of RUB 33 per share,
which exceeds free cash flow and is equivalent to 62% of adjusted net profit
for 2Q 2020.
"In terms of our expectations for market developments in the coming months,
I would note that we are optimistic about the outlook for seasonal demand in
Europe and Africa, which should support a continued upward trend in pricing
for our products, and enable us to optimise working capital levels during
the second half of this year."
2Q 2020 market conditions
In 2Q 2020, global phosphate fertilizer markets remained stable despite
fading seasonal demand in the United States, Europe and Russia.
Export supply from China remained limited due to, among other factors,
reduced MAP/DAP production and stable demand in the domestic market.
According to preliminary estimates, DAP/MAP exports from China in 2Q 2020
decreased by 700 thousand tonnes, a 27% decline year-on-year.
In view of this, there was an earlier revival of seasonal demand in India
driven by favourable weather conditions and reduced domestic production due
to quarantine restrictions. In Brazil, demand was fuelled by the favourable
global soybean market conditions and increased fertilizer availability
(favourable pricing relationship between fertilizers and key agricultural
products). As a result, Brazil's MAP imports in 2Q 2020 amounted to 1.4
million tonnes, up 0.5 million tonnes, or 62%, year-on-year.
The average price for DAP in 2Q 2020 was USD 301 per tonne (FOB Tampa),
while the average price for MAP was USD 295 per tonne (FOB Baltic).
The off-season in key nitrogen-based fertilizer markets at the start of the
reporting period impacted urea prices, which dropped to USD 200 per tonne
(FOB Baltic) and lower. Subsequently, the resumption of tender activity in
India, along with higher demand in key Latin American markets, facilitated a
rapid recovery in prices. Export supply from China remained limited, which
also helped keep prices stable in the global market. The average price for
prilled urea in 2Q 2020 was USD 209 per tonne (FOB Baltic), and the average
price for granulated urea was USD 216 per tonne (FOB Baltic).
No significant changes were observed in the principal sulphur and phosphate
markets: prices for sulphur remained stable, ranging from USD 37 to USD 50
per tonne (FOB Black Sea) and within USD 70-90 per tonne (FOB Morocco) for
phosphate raw materials.
The average price for ammonia was USD 199 per tonne (FOB Yuzhny). These low
prices are attributable to the excess supply stemming from the off-season
decline in demand in the United States and Western Europe coupled with low
demand for commercial ammonia from industrial consumers, particularly in
Asian countries.
Potash prices stabilised in the range of USD 170-230 per tonne (FOB Baltic),
depending on product type and sales markets, following long-term contracts
for supplies to China and India signed by major global producers in May
2020.
2Q and 1H 2020 financial performance
In 2Q 2020, PhosAgro's revenue increased 3.1% year-on-year to RUB 59.9
billion (USD 828 million) mainly because of the positive trend in demand in
foreign markets, which stimulated an increase in export sales of 28.2%. An
additional factor in revenue growth was the 12.1% depreciation of the rouble
against the US dollar. At the same time, the lower price for fertilizers
compared to 2Q 2019 (down 22.9% for DAP/MAP on average) limited revenue
growth.
Following the spring application season in its priority domestic market,
fertilizer demand was strongest in Latin American and Asian markets. As a
result, the share of external markets in PhosAgro's revenue increased to
68%, up from 62% in 2Q 2019. Growth in export sales was also driven by the
decrease in fertilizer production in regions where quarantine measures were
implemented.
Gross profit in 2Q 2020 increased by 8.1% year-on-year and amounted to RUB
28.6 billion (USD 395 million). The gross margin was 48%, up from 45% in 2Q
2019. Gross profit and gross profit margin in the phosphate-based and
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